EEI ESG/Sustainability Reporting Template. May 2018

Transcription

1 2018 EEI ESG/Sustainability Reporting Template May 2018

2 Introduction Southern Company is dedicated to transparency and accessibility of information as a component of constructive engagement with stakeholders. Southern Company, along with the Edison Electric Institute (EEI) and other member companies, worked with investors and other stakeholders to develop an environmental, social, governance and sustainability-related (ESG/ Sustainability) template that is consistent across the electric sector. This voluntary reporting template includes qualitative information describing ESG/sustainability governance and strategy, and quantitative information, including portfolio data focused on generation, capital investments, emissions, human resources and natural resources. Southern Company intends to update this report on an annual basis to clearly and meaningfully present information relevant to investors and stakeholders in assessing ESG risks. ESG/Sustainability Governance Oversight and Governance Southern Company believes that corporate governance underpins and enhances the long-term value shareholders seek from their investment. A long-term perspective, executed through a well-governed and highly engaged board, shapes Southern Company s strategy for realizing maximum shareholder value through every risk and every opportunity it faces. Southern Company s Board of Directors is responsible for oversight of strategy, risk, and environmental, social and governance (ESG) issues. Issues that are the subject of active discussions at Board and Board committee meetings include, among others: carbon-related risk, regulatory compliance, energy efficiency, renewable energy and emerging technology. All Board members are actively involved in the risk oversight function. The Board reviews Southern Company s risk profile and ensures that oversight of each risk is properly designated to a Board committee or the full Board. Each Board committee provides ongoing oversight for the risks designated to it, reports to the Board on their oversight activities and elevates review of risk issues to the Board as appropriate. Independent Directors chair each Board committee, and each committee has a designated member of executive management as the primary responsible officer for providing information and updates to the Board committee related to significant risks. There is regular, open communication between management and the Board on these topics throughout the year. The Nominating, Governance, and Corporate Responsibility (NG&CR) Committee oversees and reports to the full Board on the composition and competencies of the Board and its committees and corporate governance policies, including but not limited to, reviewing and making recommendations to the Board regarding Southern Company s practices and positions to advance its corporate citizenship, including environmental, sustainability and corporate social responsibility initiatives. The NG&CR Committee receives updates about Southern Company s ongoing shareholder engagement program and feedback received from shareholders on ESG topics, including climate-related risks and disclosures. The Operations, Environmental and Safety (OE&S) Committee oversees and reports to the full Board on significant environmental and safety policy and planning issues relevant to Southern Company, including but not limited to programs, policies, and procedures to protect the environment and provide a healthy and safe environment for employees, customers, contractors and the public. The OE&S Committee receives regular reports on operating units safety and environmental activities and engages in robust discussions about carbon emissions and carbon risks, strategic planning, and scenario planning and analysis. [ 1 ]

3 Risk Management We have a robust enterprise risk management program that facilitates identification, communication and management of the most significant risks in a formal process. Within this framework, risk governance and oversight are largely embedded in existing organizational and control structures. As a part of the governance structure, the chief risk officer is accountable to the chief executive officer (CEO) and the Board for ensuring that enterprise risk oversight and management processes are established and operating effectively. Officers and senior managers are responsible for working across the business to manage enterprise-level risk, monitor the performance of risk mitigation strategies and identify emerging risks. They meet routinely and engage regularly with the Board and its committees throughout the year. Specific to environmental issues, Southern Company s environmental affairs director is responsible for environmental programs, including carbon policy activities, for the Southern Company system. The environmental affairs director reports to the environmental and system planning vice president, who reports to the chief operating officer (COO), who reports to the chairman, president and chief executive officer (CEO) of Southern Company. Overall environmental leadership is provided by Southern Company management council, a team of senior officers responsible for setting and reviewing corporate policies and key strategies and evaluating the company s performance. The management council is made up of Southern Company s CEO; COO; executive vice president and chief financial officer; president of external affairs; executive vice president, general counsel and chief compliance officer; executive vice president and chief human resources officer; and the CEOs of each operating company and Southern Company Services. ESG/Sustainability Strategy Adapting to the changing business environment The energy sector is rapidly evolving, driven by customer preferences, technology advancements, commodity prices, energy security and resiliency efforts, and environmental, social and governance initiatives. With evolution comes opportunity and Southern Company, with its customer-centric business model, is poised to provide continued value to customers and communities in this evolving energy landscape. Innovation For over 100 years, Southern Company has been committed to innovation with a focus on the research and development of emerging energy solutions. The Southern Company system has invested approximately $7 billion over the past 12 years on grid improvements and is pursuing the development of cost-effective renewable generation resources that will benefit customers and drive innovation. Southern Company has over 20 research and development projects underway to determine the potential of different renewable resources and technologies. Regulatory Environment The state and federal level regulatory environment is also evolving. Public Policy Considerations: Southern Company engages in the public policy debate as well as works with legislators and regulators to support an energy policy that reflects the evolving business structure, promotes innovation, improves the lives of customers and restores America s financial integrity. Southern Company interacts with Congress and agencies including the Federal Energy Regulatory Commission, Federal Communications Commission, Nuclear Regulatory Commission, Department of Energy, Department of Defense, Environmental Protection Agency, and Department of Homeland Security. Southern Company also participates in the regulatory process through industry groups and committees, including the Electric Power Research Institute, American Gas Association, Utility Air Regulatory Group, the Utility Water Act Group, the Utility Solid Waste Activities Group, Edison Electric Institute and the Nuclear Energy Institute. Political contributions to organizations can be found in the political contribution report. State Public Service Commissions: Our electric operating companies and our natural gas local distribution companies are subject to the jurisdiction of their respective state Public Service Commissions (PSCs) and state environmental agencies. PSCs have broad regulatory authority over the companies, including approval of new supply-side and demand-side resources and related cost recovery rates, while environmental agencies are charged with the enforcement of each state s unique environmental policies. At varying frequencies or under various circumstances, the electric operating companies file with their respective PSCs economic analyses of recommendations or decisions using the scenario planning process. Accordingly, decisions made by an electric operating company regarding its assets, including those requiring specific PSC approval, are in the best economic interest [ 2 ]

4 of its customers, based on information available at the time the decisions are made, and addresses fuel and CO₂ pricing scenarios, natural resources, as well as local community impacts such as jobs and taxes. Managing and adapting to future risks and opportunities Risks Carbon-constrained future: Southern Company recognizes that domestic policies may emerge in the future that transition the U.S. to a lower carbonemitting economy. Southern Company s business strategy is intended to guide it to meet the future energy needs of customers, not just their energy needs of today. This strategy includes: Pursuing a diverse portfolio of low and carbonfree resources and energy efficiency resources Continuing our proprietary research and development, as well as active participation in the Electric Power Research Institute with particular focus in technologies that lower carbon emissions Constructively engaging with policymakers, regulators, investors and our customers to support outcomes leading to a low carbon future We aim to minimize the Southern Company system s exposure to carbon risk across the energy value chain as we make, move and sell energy to a wide customer base. Our business model relies heavily on state-regulated electric and natural gas investments as well as long-term contracted energy infrastructure, which differentiates Southern Company from other businesses. We believe that operating a customercentric business model provides the opportunity to effectively respond to future carbon regulations and the potential to succeed in an accelerated transition to a low carbon business environment. By continuing to make major energy decisions that are in the best interest of customers, appropriately consider fuel and carbon risks, and are approved by our state regulators, we expect to continue to receive fair regulatory treatment of our state-regulated investments. We believe that investment risk to these rate-regulated assets is limited. Information on how Southern Company prepares for a potential carbon-constrained future can be found in our Planning for a low-carbon future document located in the Corporate Responsibility section of our website. Information on how Southern Company manages stranded asset risk can be found in our FAQs: Asset Strategy, Planning and Risks document located in the Corporate Responsibility section of our website. Low demand growth: Despite slowing or stagnant electric load growth across much of the U.S., the Southern Company system s Southeast service territory has generally performed better than the national trend, largely due to U.S. population shifts to the region. A major requirement of ensuring significant generating capacity to serve customers is to do the best job possible in forecasting demand growth. Southern Company uses a combination of short-term econometric techniques, short-term surveys and long-term end-use modeling tools to forecast demand growth. Even while Southern Company s forecasting suggests that electric use per customer will continue to decline, the company expects to still see overall demand growth albeit at less than historical rates. In any event, however, customer satisfaction remains the paramount goal. The combination of an intense focus on customer needs and a constructive regulatory environment drives Southern Company to develop solutions that deliver longterm customer value with a goal of delivering regular, predictable and sustainable returns for shareholders, even with use per customer declining. Opportunities The evolving nature of the energy sector presents opportunities to expand our business while maintaining our customer-centric business model. We will continue our commitments to research and development and to help shape responsible energy policies that promote optionality across the entire energy value chain and retain each state s ability to adequately plan and deploy resources that meet the needs of their citizens and communities. Information on Southern Company s historical and planned activities related to resource diversity, distributed energy resources, energy efficiency, innovative customer interactions and demand response can be found in our FAQs: Asset Strategy, Planning and Risks document located in the Corporate Responsibility section of our website. Progress and Plans Today, we are one of the only energy companies pursuing an all of the above energy strategy. We believe developing and maintaining a diversified energy portfolio is essential to successfully reducing carbon emissions while maintaining reliability and affordability. Southern Company s portfolio was initially founded on hydroelectric generation and has grown to include coal, natural gas, nuclear, biomass, landfill gas, solar, wind, energy efficiency programs, demand response and distributed resources. Over the last decade, we have significantly transformed our system's electricity generation mix. [ 3 ]

5 Electricity generation mix % 16% 14% 1% Coal Natural Gas Nuclear Renewables/Other 47% 28% 15% 10% Natural Gas Coal Nuclear Renewables/Other Southern Company s environmental compliance strategy involves the continuous monitoring of policy developments, compliance options and other factors which may impact the long-term viability of our electric generating units. Over the past eight years, more than 50 percent of our coal units have been retired or converted to natural gas. Recent generation decisions and environmental compliance strategies have led to approximately 4,200 MW of coal- and oil-related retirements since 2010 and approximately 3,300 MW of natural gas fuel switches since We invest in a diverse portfolio of low-carbon and carbon-free energy assets to serve customers and communities with a focus on maintaining reliability and affordability while reducing carbon emissions. Through our subsidiaries we have invested $20 billion in developing low-carbon and carbon-free resources and more than 5,000 MW of renewable generating capacity has been added across the system since Our current portfolio of over 12,000 MW of carbon-free and carbon neutral resource capacity has established a foundation enabling us to continue our carbon reduction efforts. We expect to add an additional 3,000 MW of renewable generating capacity and an additional 1,000 MW of carbon-free nuclear generation by ¹ Growing portfolio of carbon-free and carbon neutral energy sources % 25% 22% 21% 2% 12,000 MW 30% 29% 19% 19% 3% We are setting a long-term goal of low- to no-carbon operations by 2050 on an enterprise-wide basis. On our path to 2050, we have set a goal of 50 percent reduction from 2007 levels in CO₂ emissions by These goals are aligned with our long-term business strategy and our commitment to a leadership role in developing solutions that make technological and economic sense. Achievement of these goals will be dependent on many factors, including natural gas prices and the pace and extent of improvements in energy technology. Metrics and goals GHG emissions reductions 36% Reduction in GHG emissions % Reduction in GHG emissions 2030 LOW to NO GHG emissions In addition, we aim to reduce fugitive methane emissions for our natural gas distribution operations to align with Our Nation s Energy (ONE) Future s 2025 goal. Southern Company Gas was a founding member in ONE Future. Today, our natural gas operations intensity is already 0.26 percent, which is below ONE Future's 2025 goal of 0.44 percent for local distribution companies. Information on Southern Company s fugitive methane intensity reduction progress, including pipeline survey and replacement programs can be found in our FAQs: Methane Emissions document located in the Corporate Responsibility section of our website. In addition to reducing greenhouse gas emissions and complying with applicable environmental regulations, the Southern Company system is reducing its impact on the environment through stewardship protecting valuable natural resources, wildlfe and habitats. Highlights on recent stewardship, water, air, coal ash management, and energy efficiency-related activities, can be found in our Environmental Responsibility and Stewardship: Facts and Figures document located in the Corporate Responsibilty section of our website. Quantitative information on the Southern Company system's generation, capital investments, emissions, human resources and natural resources can be found below ,000 MW 1 Generally, with respect to renewable energy generated or purchased by the state-regulated electric operating companies, the state-regulated electric operating companies retain the right to use the renewable energy to serve customers or to sell the energy and associated renewable energy credits, together or separately, to third parties for the benefit of customers. [ 4 ]

6 Cautionary note regarding forward-looking statements Certain information contained in this report is forward-looking information based on current expectations and plans that involve risks and uncertainties. Forward-looking information includes, among other things, future demand expectations, plans for reducing carbon emissions, and other items related to Southern Company s future business plans. Southern Company cautions that there are certain factors that can cause actual results to differ materially from the forward-looking information that has been provided. The reader is cautioned not to put undue reliance on this forwardlooking information, which is not a guarantee of future performance and is subject to a number of uncertainties and other factors, many of which are outside the control of Southern Company and its subsidiaries; accordingly, there can be no assurance that such suggested results will be realized. The following factors, in addition to those discussed in Southern Company s and its subsidiaries Annual Reports on Form 10-K for the year ended December 31, 2017, and subsequent securities filings, could cause actual results to differ materially from management expectations as suggested by such forward-looking information: the impact of recent and future federal and state regulatory changes, including environmental laws and regulations governing air, water, land, and protection of other natural resources, as well as changes in application of existing laws and regulations; current and future litigation or regulatory investigations, proceedings, or inquiries; the effects, extent, and timing of the entry of additional competition in the markets in which Southern Company s subsidiaries operate; variations in demand for electricity and natural gas, including those relating to weather, the general economy, population and business growth (and declines), the effects of energy conservation and efficiency measures, including from the development and deployment of alternative energy sources such as self-generation and distributed generation technologies; available sources and costs of natural gas and other fuels; limits on pipeline capacity; transmission constraints; advances in technology; ongoing renewable energy partnerships and development agreements; state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to fuel and other cost recovery mechanisms; the ability of Southern Company s electric utilities to obtain additional generating capacity (or sell excess generating capacity) at competitive prices; catastrophic events such as fires, earthquakes, explosions, floods, tornadoes hurricanes and other storms, droughts, pandemic health events such as influenzas, or other similar occurrences; and the direct or indirect effects on the Southern Company system s business resulting from incidents affecting the U.S. electric grid, natural gas pipeline infrastructure, or operation of generating or storage resources. Southern Company and its subsidiaries expressly disclaim any obligation to update any forward-looking information. [ 5 ]

7 Quantitative Information - Portfolio Parent Company: Southern Company Operating Company(s): Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Southern Power, Southern Nuclear, Southern Company Gas, PowerSecure Business Type(s): Vertically Integrated State(s) of Operation: Retail Electric Provider: Alabama, Georgia, Florida, and Mississippi; Wholesale Electric Provider: Alabama, California, Florida, Georgia, Maine, Minnesota, Nevada, New Mexico, North Carolina, Oklahoma, and Texas; Natural Gas Distribution: California, Florida, Georgia, Illinois, Louisiana, Maryland, New Hampshire, New Jersey, Tennessee, Texas, and Virginia State(s) with RPS Programs: California, Illinois, Maine, Maryland, Minnesota, Nevada, New Hampshire, New Mexico, North Carolina, and Texas Regulatory Environment: Both Report Date: May 2018 Portfolio Ref No. 1 Owned Nameplate Generation Capacity at end of year (MW) 2,3 1.1 Coal 1.2 Natural Gas/Petroleum 1.3 Nuclear 1.5 Total Renewable Energy Resources Biomass/Biogas Geothermal Hydroelectric Solar Wind 1.6 Other 2 Net Generation for the data year (MWh) Coal 2.2 Natural Gas/Petroleum 2.3 Nuclear 2.5 Total Renewable Energy Resources Biomass/Biogas Geothermal Hydroelectric Solar Wind 2.6 Other 4 3 Investing in the Future: Capital Expenditures, Energy Efficiency (EE), and Smart Meters 3.1 Total Annual Capital Expenditures (nominal million dollars) Incremental Annual Electricity Savings from EE Measures (MWh) Incremental Annual Investment in Electric EE Programs (nominal thousand dollars) Percent of Total Electric Customers with Smart Meters (at end of year) 5 4 Retail Electric Customer Count (at end of year) 4.1 Commercial 4.2 Industrial 4.3 Residential Baseline Current Year ,150 17,513 12,919 18,744 3,680 3, ,759 2,756-2,282-1, ,759,307 59,846,787 20,804,724 94,303,503 32,102,011 30,313, ,756,092 4,225, ,565,725 $2,498 $7, ,535 - $26,983-96% 585, ,508 14,592 17,323 3,641,505 3,970,370 2 As reported in the Annual Report on Form 10-K Financial Disclosure. 3 This report contains the amount of total installed nameplate capacity owned by resource type. It should be assumed that the generator or purchaser of energy from any renewable generation resources has the ability to use the associated renewable energy credits (RECs) to serve its customers with renewable energy or sell the RECs to third parties. 4 Other represents biomass, solar, and wind generation resources. 5 As reported in the U.S. Energy Information Administration's form EIA-861. [ 6 ]

8 Quantitative Information - Emissions Parent Company: Southern Company Operating Company(s): Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Southern Power, Southern Nuclear, Southern Company Gas, PowerSecure Business Type(s): Vertically Integrated State(s) of Operation: Retail Electric Provider: Alabama, Georgia, Florida, and Mississippi; Wholesale Electric Provider: Alabama, California, Florida, Georgia, Maine, Minnesota, Nevada, New Mexico, North Carolina, Oklahoma, and Texas; Natural Gas Distribution: California, Florida, Georgia, Illinois, Louisiana, Maryland, New Hampshire, New Jersey, Tennessee, Texas, and Virginia State(s) with RPS Programs: California, Illinois, Maine, Maryland, Minnesota, Nevada, New Hampshire, New Mexico, North Carolina, and Texas Regulatory Environment: Both Report Date: May 2018 Emissions Ref No. Baseline Current Year GHG Emissions: Carbon Dioxide (CO 2) and Carbon Dioxide Equivalent (CO 2e) Owned Generation Carbon Dioxide (CO 2) Total Owned Generation CO 2 Emissions (MT) Total Owned Generation CO 2 Emissions Intensity (MT/Net MWh) Carbon Dioxide Equivalent (CO 2e) Total Owned Generation CO 2e Emissions (MT) Total Owned Generation CO 2e Emissions Intensity (MT/Net MWh) 7 137,000,000 99,000, ,000, ,000, Non-Generation CO 2e Emissions Fugitive CO 2e emissions of sulfur hexafluoride (MT) Fugitive CO 2e emissions from natural gas distribution (MT) - 37, ,970 6 Nitrogen Oxide (NO x), Sulfur Dioxide (SO 2), Mercury (Hg) 6.1 Generation basis for calculation Total Total 6.2 Nitrogen Oxide (NO x) Total NO x Emissions (MT) Total NO x Emissions Intensity (MT/Net MWh) 7 198,406 41, Sulfur Dioxide (SO 2) Total SO 2 Emissions (MT) Total SO 2 Emissions Intensity (MT/Net MWh) 7 891,872 30, Mercury (Hg) Total Hg Emissions (kg) Total Hg Emissions Intensity (kg/net MWh) 7 4, See "Planning for a Low-Carbon Future". ⁷ Generation values used in intensity calculations may vary based on associated regulatory reporting program requirements. [ 7 ]

9 Quantitative Information - Resources Parent Company: Southern Company Operating Company(s): Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Southern Power, Southern Nuclear, Southern Company Gas, PowerSecure Business Type(s): Vertically Integrated State(s) of Operation: Retail Electric Provider: Alabama, Georgia, Florida, and Mississippi; Wholesale Electric Provider: Alabama, California, Florida, Georgia, Maine, Minnesota, Nevada, New Mexico, North Carolina, Oklahoma, and Texas; Natural Gas Distribution: California, Florida, Georgia, Illinois, Louisiana, Maryland, New Hampshire, New Jersey, Tennessee, Texas, and Virginia State(s) with RPS Programs: California, Illinois, Maine, Maryland, Minnesota, Nevada, New Hampshire, New Mexico, North Carolina, and Texas Regulatory Environment: Both Report Date: May 2018 Resources Ref No. 7 Human Resources 7.1 Total Number of Employees 7.2 Total Number on Board of Directors/Trustees 7.3 Total Women on Board of Directors/Trustees 7.4 Total Minorities on Board of Directors/Trustees 7.5 Employee Safety Metrics Recordable Incident Rate Lost-time Case Rate Days Away, Restricted, and Transfer (DART) Rate Work-related Fatalities Baseline Current Year ,554 32, Fresh Water Resources 8.1 Water Withdrawals - Consumptive (Millions of Gallons/Net MWh) Water Withdrawals - Non-consumptive (Millions of Gallons/Net MWh) Waste Products 9.1 Percent of Non-hazardous Municipal Solid Waste Diverted 9.2 Percent of Coal Combustion Products Beneficially Used N/A Generation values used in intensity calculations may vary based on associated regulatory reporting program requirements. [ 8 ]